The BlockFi logo displayed on a phone screen and a display of cryptocurrencies can be seen in this illustration taken in Krakow, Poland, on November 14, 2022.

Yakub Pazhytsky | Nurphoto | Getty Images

Troubled crypto firm BlockFi has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey following the collapse of prospective buyer FTX.

The company said in a statement that it has more than 100,000 creditors with liabilities and assets between $1 billion and $10 billion. The company also transferred an outstanding $275 million loan to FTX US, the American arm of the now-bankrupt Sam Bankman-Fried empire.

A subsidiary of BlockFi also filed for bankruptcy in Bermuda at the same time as the US filing.

Bermuda, like the Bahamas, has embraced cryptography as the future of finance. Both have created frameworks for dealing with crypto-assets and digital currencies. Both the Bahamas, with the FTX bankruptcy, and now Bermuda, with BlockFi, have faced the first significant legal tests of their crypto regulations.

BlockFi’s bankruptcy filing shows the balance of the company’s largest disclosed customer is nearly $28 million.

“BlockFi is committed to a transparent process that will deliver the best outcome for all customers and other stakeholders,” Mark Renzi of Berkeley Research Group said in a press statement. BRG is acting as financial advisor to BlockFi.

A crypto company that offers a trading exchange and interest-bearing cryptocurrency custody services, was one of many firms that faced serious liquidity problems after the collapse of Three Arrows Capital.

The Jersey City, New Jersey-based company has already stopped withdrawing customer deposits and admitted it had “significant influence” on the now-bankrupt crypto exchange FTX and its subsidiary trading house Alameda Research.

“We have significant exposure to FTX and related corporate entities, which includes Alameda’s obligations to us, assets held at, and unused amounts from our line of credit at FTX.US,” BlockFi previously reported.

The company began talks with restructuring specialists days after FTX filed for bankruptcy, according to people familiar with the matter.

A representative for BlockFi did not immediately respond to requests for comment.

BlockFi, last valued at $4.8 billion according to PitchBook, is one of many crypto firms feeling the pressure of the FTX collapse. In July, FTX swooped in to help BlockFi avoid bankruptcy by providing a $400 million revolving credit line and offering to potentially buy the beleaguered lender.

Sam Bankman-Fried’s FTX cryptocurrency exchange filed for Chapter 11 bankruptcy protection in the US on November 11, and the ripple effect of the crypto sector has been swift.

About 130 additional affiliates are involved in the process, including Alameda Research, Bankman-Fried’s crypto trading firm, and, the company’s US subsidiary. FTX’s new CEO, John Ray, said in a filing in Delaware bankruptcy court that “in 40 years of legal work and restructuring experience” he had never seen “such a complete breakdown of corporate controls and such a complete lack of reliable financial information as this happened here.”

Ray previously served as CEO of Enron after the collapse of the energy titan.

FTX went from a $32 billion valuation to bankruptcy in a matter of days as liquidity dried up, customers demanded withdrawals and rival exchange Binance pulled a non-binding agreement to buy the company. Gross negligence was exposed. Ray added that a “significant portion” of the assets held by FTX could be “missing or stolen.”

FTX has more more than 1 million creditors, according to updated bankruptcy filings, hinting at the huge impact its collapse could have on crypto traders and other counterparties linked to the Bankman-Fried empire.

Authorities to extradite Sam Bankman-Fried to US for questioning: Report

Correction: BlockFi’s subsidiary also filed for bankruptcy in Bermuda, not the Bahamas.

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